Two important points relating to automobiles need to be addressed. First, the half-year rule for all assets means that only a half-year of Capital Cost Allowance (CCA) can be claimed for the year that you purchase an asset. Therefore, if you decide to purchase an asset late in the year, there is a greater benefit buying on or before December 31. If you purchase an asset on December 31, 2001, you can claim a half-year’s CCA in 2001 and a full year in 2002. If, however, you purchase the same asset on January 1, 2002 (one day later), you cannot claim CCA in 2001 and can only claim a half-year’s CCA in 2002. Therefore, you end up being one full year behind on CCA deductions by purchasing only one day later. The second point is that if your vehicle is a "passenger vehicle" rather than an "automobile", it will belong to class 10.1 rather than class 10. Class 10.1 is more restrictive and in 2001 only allows you to capitalize $30,000 plus applicable sales taxes.
Click here for a complete list of Tax Tips.
Copyright © 2002 Intuit Canada Limited